Oral Agreement Ruled Not Binding

May 19, 1991|By Robert Bruss.

John, a real estate broker, talked with James about the sale of his 97.4 acres. James said he wanted John to find a joint venture development partner. In return, James orally agreed to pay John a 10 percent commission.

Shortly thereafter, John introduced James to Oleson and Magdych, who acquired the property for joint venture development. Upon learning of the sale for $2,503,000, John requested James to pay the promised $250,300 sales commission.

But James refused, explaining the statute of frauds requires a real estate sales commission agreement to be in writing to be legally enforceable. However, John replied the fee agreement was outside the statute of frauds, since John did not locate a buyer, but rather development partners.

If you were the judge, would you order James to pay John a $250,300 fee?

The judge said no.

The purpose of the statute of frauds as applied to real estate, the judge explained, is to prevent misunderstandings by requiring real estate contracts, such as listings and sales agreements, to be in writing to be legally enforceable.

Although the statute of frauds might not specifically apply to joint venture agreements, he continued, since the activities involved finding a buyer for the property for a commission, such an agency agreement must be in writing to be legally enforceable. Neither does John`s reliance on the alleged oral promise of James to pay a commission allow recovery on a fraud theory or on a theory of intentional interference with prospective economic advantage, the judge ruled.

Based on the 1991 California Court of Appeal decision in Grant vs. Halverson, 278 Cal.Rptr. 880.